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Plywood manufacturers in the organised sector expect the roll out of goods and services tax (GST) regime would boost their sales in a market dominated by the unorganised sector. In the Rs 25,000-crore Indian plywood market, the unorganised sector has around 65 per cent market share.
With the Centre favouring GST introduction at the earliest, the adoption of uniform taxation through it might turn favourable for these players. Some of the organised players in the segment include Greenply, Century Ply, Kitply Industries, National Plywood and Uniply Industries.
According to Keshav Kantamneni, chief executive of Uniply Industries, the situation would be different with the launch of GST, which, he says would result in "a level-playing field for the organised manufacturers, and would also make inferior quality plywood less competitive".
The price advantage being enjoyed by the unorganised manufacturers would diminish gradually, making high-quality plywood competitive, he says. Existing manufacturers pay 16 per cent excise duty and four per cent sales tax on their produce. However, unorganised sector does away with tax payments using the inter-state differing tax structure.
According to the Federation of Indian Plywood & Panel Industry, lowering of excise duty to below 10 per cent would force the unorganised plywood units to make excise payments regularly besides opting for better quality raw material to stay in the market.
Bengaluru-based Indian Plywood Industries Research & Training Institute too expects the roll out of GST would make it tough for the unorganised sector as inferior quality plywood would become less competitive. This would also lead to a reduction in the import of low-cost Chinese produce in the coming years, it said.
The plywood demand, meanwhile, is set to witness a jump with the rise in real estate demand and the Centre's plan to establish smart cities and other urban infrastructure projects. As against a 5-6 per cent growth seen last year, it is expected to clock a double-digit growth this fiscal, led by better product price realisations and consumers' preference for premium products. For the Q1 this fiscal, Century Ply posted a 54 per cent rise in standalone net to Rs 39 crore, as against a net of Rs 25.72 crore for the same period last year.
Top producers, therefore, are expanding their capacities and are increasingly looking to acquire manufacturing units in north and western regions, where the demand is anticipated to come from. For instance, Uniply is targeting a nine-fold jump in turnover in the next five years, up from the Rs 172-crore in the last fiscal. Green Ply Industries is currently expanding its Rajasthan laminates factory plant.
The protracted slowdown in the domestic plywood demand in China had resulted in companies there reducing capacity. Some had shut units due to the imposition of ban on logging of high-quality wood in the most-preferred Myanmar.
As a result, low-cost producers here are either sourcing veneers (facing layers in a plywood) from established domestic players, and binding them with cheap rubber plantation wood, bamboo and other materials, which have poor durability.
The Supreme Court in 2000 had stopped the Union government from granting fresh licences to wood -based processing industries. Also, there is a domestic ban on logging, and most of the raw material is being procured from Africa, Vietnam, Laos, New Papua Guinea and Indonesia.
